The Bank of Japan cut its economic growth forecast, raised its inflation estimate and kept its benchmark interest rate at 0.5 per cent, saying higher commodity prices are hurting the expansion.
The world's second-largest economy will grow 1.2 per cent in the year ending March 31, slower than the 1.5 per cent forecast on April 30, the central bank said. Consumer prices, excluding fresh food, will climb 1.8 per cent, more than the 1.1 per cent projected three months ago, it said.
Growth is "slowing further" because higher energy and raw materials costs are discouraging businesses and consumers from spending, the bank said.
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